RC Poll: Virginia Real Estate Index

Sentiments concerning the Virginia real estate market remain strong. Central and Northern Virginia and the Tidewater show particular strength, which is driven by sellers' anticipation of higher prices. Falling inventories are a primary cause of rising real estate prices.

Market remain strong across the Commonwealth

Overall sentiments about the condition of the Virginia real estate market remain strong, and opinions about the current market reverse a year-long decline. Twenty-eight percentage-point more respondents feel optimistic than pessimistic about the market today, down four points since last quarter. Figure 1 shows the real estate indexes for the Commonwealth. Fifty-eight percent of Virginians believe that the condition of the real estate market has improved since last year, while 20 percent believe that it has worsened. Additionally, 50 percent believe that conditions will improve over the next year, down two points since May. Seventeen percent believe that the market will decline in the coming year, up two points from last quarter.

Figure 1. Real Estate Index, Overall, Virginia (black line = thriving); current = compared to last year; future = next year

Sale prices and other real estate market outcomes depend upon a variety of factors influencing buyers and sellers. Several positive items are likely playing a role. The Virginia labor market is stronger than the nation as a whole; the July 2016 seasonally adjusted unemployment rate in the Commonwealth is 4.0 percent, below the current national rate of 4.9 percent. Overall prices for goods and services remain low since the recent economic recession and consumer sentiment in the Commonwealth continues to rise.

Housing prices are rising considerably faster than overall prices and wages. Figure 2 shows for-sale inventories and median list prices in the Virginia real estate market over the past two years. In July, statewide inventories were down 4,970 from a year prior (a 10% drop) and below the 15-year median value. The average listing price was $18,550 higher than a year prior, a 6.9 percent increase, and $44,075 higher than its nominal 15-year median value. The dwindling supply of homes relative to demand is leading sellers to list homes at higher prices.

Figure 2. Median list price (line) and for-sale inventory (bar), Virginia; (data from zillow.com 9/18/2016)

Real estate markets face potential push backs. Some respondents anticipate rising mortgage rates, an added cost of buying a home. Mortgage rates are low and down slightly since last quarter. On September 18, 2016 zillow.com reports an average mortgage rate of 3.39 percent in the Commonwealth for a 30 year fixed rate mortgage with at least 20 percent down and a credit score of at least 740. Figure 3 shows rates offered under those conditions over the past two years.

Figure 3. 30-year mortgage rates September 2014-September 2016, Virginia (downloaded from zillow.com 9/18/2016)

Figure 4 shows index values for sellers in Virginia over the last year. Seller optimism about the coming year is strong although it continues its 12-month decline. Seventeen percentage point more respondents believe that the coming year will be a good time to sell a home than those who don't, down three points from last quarter. Low mortgage rates are the primary reason given for selling optimism, followed by higher housing prices and income and falling inventories.

Figure 4. Real Estate Index, Sellers, Virginia (black line = thriving); current = compared to last year; future = next year

Figure 5 illustrates index values for buyers in Virginia over the last year. Current optimism remains strong although down slightly since last quarter; twenty-three percentage point more respondents believe now is a good time to buy a home than believe it is not. That optimism remains consistent heading into the coming year as buyer optimism about the coming year is up considerably since May. The leading source of optimism among buyers is lower rates. Forty-four percent of those who believe the coming year will be a good time to buy a house attribute their sentiments to mortgage rates, which is a 20 percentage point increase. Other reasons for optimism include lower prices (22 percent) and higher incomes (21 percent). For those who believe the coming year will not be a good time to buy a home, 37 percent cite rising rates as the primary cause, while 48.2 percent reference rising prices. Home buyer perceptions of the direction of mortgage rates are showing volatility and disagreement.

Figure 5. Real Estate Index, Buyers, Virginia (black line = thriving); current = compared to last year; future = next year

Regional strength, particularly Central and Northern Virginia

Figures 6 and 7 show current and future conditions by region. Compared to last year, each region save Southwest Virginia reports more optimists than pessimists about the real estate market. This is particularly true in Central Virginia, Northern Virginia, and the Tidewater. Figure 8 shows list prices and inventories for various MSAs across the Commonwealth. Higher prices are the likely cause for market optimism, particularly in Richmond, Charlottesville, Washington D.C., and Winchester where July median list prices are higher than the long term average for those areas. In all but Washington, D.C. inventories are down, putting upward pressure on prices.

Figure 6. Current Conditions by Region (color to separate regions)

Looking to the coming year market optimism remains strong in most regions, particularly Northern Virginia, Central Virginia, and the Tidewater. In Northern Virginia, over 60 percent of respondents anticipate improvements in the real estate market. Looking at both sides of the market, the optimism near the nation's capital is driven by sellers as over 45 percent cite positivity about the coming year; comparatively, more buyers express concern over the coming months. Rising prices are the likely driver in this divide between buyers and sellers.

Figure 7. Future Conditions by Region (color to separate regions)

Figure 8. Select city median list price (blue dot = median list price last 15 years, orange dash = July 2016 average list price, black line = standard deviation average list price; percentage change in inventories over prior 12 months shown in parentheses). Data source: zillow.com

Methodology

Interviewing for The Roanoke College Poll was conducted by The Institute for Policy and Opinion Research at Roanoke College in Salem, Va. August 7-15, 2016. A total of 607 Virginia residents 18 or older were interviewed. Telephone interviews were conducted in English and Spanish. The random digit dial sample was obtained from asde Survey Sampler and includes both Virginia landline and cell phone exchanges so that all cell phone and residential landline telephone numbers, including unlisted numbers from Virginia exchanges, had a known chance of inclusion. Nearly 30 percent of respondents were contacted via cell phone. Because most surveys undersample younger males, we ask to speak to the youngest male over 18 when we call landlines. If there is no young male in the household or if he is not available, then we conduct the interview with the person who is eligible and available.

Questions answered by the entire sample of 607 consumers are subject to a sampling error of plus or minus approximately 4 points at the 95 percent level of confidence. This means that in 95 out of 100 samples, like the one used here, the results obtained should be no more than 4 points above or below the figure that would be obtained by interviewing all consumers who have a telephone. Where the results of subgroups are reported, the sampling error is higher. Sampling weights were constructed using Virginia Census 2010 data by age, race and gender groups. Quotas were used to ensure that different regions of the Commonwealth were proportionately represented. The margin of error was not adjusted for design effects due to weighting.

A copy of the questions and all toplines may be found here.

The Roanoke College Poll is funded by Roanoke College as a public service.

Released: September 21, 2016

For more about the Institute for Public Opinion Research, click here. 

Contact Name: Dr. Alice Louise Kassens, Senior Analyst, IPOR
Contact Phone: (540) 375-2428 Office, (540) 816-8830 Cell
Contact Email: kassens@roanoke.edu